Janet Yellen's ascendancy shows durability of Ben Bernanke's program

Janet Yellen, vice chair of the Board of Governors of the Federal Reserve System, answers a question from a participant at the International Monetary Conference in Shanghai, China, Monday, June 3, 2013. (AP Photo/Eugene Hoshiko)

Federal Reserve Vice Chair Janet Yellen's candidacy for the top spot at the Federal Reserve received a boost last week when 40 of 44 economists surveyed by Reuters picked her as the most likely replacement for Chairman Ben Bernanke when he leaves.

Bernanke's current term is slated to expire in January, and many Fed observers expect him to announce his retirement early this fall and return to academia.

It's possible that Bernanke could be reappointed for a third term or that President Obama could nominate another candidate, such as his former Treasury secretary Timothy Geithner or former top economic adviser and Harvard professor Larry Summers. But if Yellen succeeds Bernanke, it would represent a success for Bernanke in his approach to fighting the lingering effects of the recession that hit on his watch.

Yellen, who at 66 is the better part of a decade older than Bernanke, is known as a political liberal and a "dove" who is more concerned about unemployment than inflation. She's a Democrat, having served on President Bill Clinton's Council of Economic Advisers and having been appointed by both Clinton and Obama to the Federal Reserve Board of Governors. She is known in her academic research for taking on economic orthodoxies relating to labor and the macroeconomy, especially in her work with her husband, Nobel Prize winner George Akerlof.

Although her political views might differ from those of Bernanke, who was originally appointed by George W. Bush, Yellen's appointment would mean a continuation and eventually fulfillment of Bernanke's vision for expansionary monetary policy, namely large-scale asset purchases and careful guidance to the markets that the Fed will not try to tighten policy until certain economic benchmarks are met.

Over the four years since the official end of the 2007-2009 recession, Bernanke has pieced together a sympathetic majority on the Federal Open Market Committee, the group responsible for conducting monetary policy. Bernanke's views have gained currency partly because several of Obama's recent nominees for the Board of Governors have been like-minded, but also because of his ability to convince other Fed members. In the fall, Minneapolis Fed President Narayana Kocherlokata revealed that Bernanke had convinced him with a patient campaign of persuasion over email to abandon his push for higher interest rates.

Yellen would depart from Bernanke on a few policy matters. In an April 16 speech, she indicated a willingness to embrace more aggressive financial regulation rather than monetary policy to curb risk-taking in the financial sector. Yellen also has stated a preference for using more detailed economic indicators than Bernanke monitors for assessing the labor market's health, suggesting in a March speech that the number of workers quitting their jobs could be a useful marker.

Nevertheless, she has clearly indicated a commitment to Bernanke's program of using quantitative easing and other available tools to boost the markets, and also to aggressively tighten monetary accommodation when necessary. "When the time has come, am I going to support raising interest rates? You bet," she said at a Fed event in 2010, according to a recent New York Times profile.

Both the markets and Bernanke himself already have indicated Yellen would see Bernanke's anti-recession program through to its completion. The same Times profile paraphrases Morgan Stanley chief economist Vincent Reinhart saying that "any shift in policy" from Bernanke to Yellen "would most likely be modest" as Yellen already "exercises considerable influence" as vice chairwoman.

For his part, Bernanke said at a March news conference that he does not think that he's "the only person in the world who can manage the exit" of the Fed from its current expansionary monetary stance.